Evergrande tries to calm investors

China Evergrande (3333) offered a three-option plan to appease investors concerned about overdue payments for its high-yield wealth management products when a local authority in Foshan banned buyers from obtaining mortgage loans for buying units in Evergrande projects.

The three options the embattled mainland developer provided include repayment through cash installments, properties or investors’ payables on residential units already purchased, Caixin reported.

Such wealth products are offered by Evergrande Wealth Management, the company’s internet finance affiliate.

Evergrande expanded heavily in the financial sector from 2015 to 2017, before being named a de facto financial holding company in 2018 by the central bank. Many of the products’ buyers are Evergrande employees.

Regulators have been moving to curb the issue of such shadow finance products because the underlying assets are often off the balance sheet.

Evergrande’s repayment plan revealed yesterday appears to treat all investors equally in contrast to an interim plan released late last week that prioritized smaller investors.

When it stopped repaying some investors on Thursday, people who have bought less than 100,000 yuan (HK$120,500) of Evergrande Wealth Management products were to be paid in full, and those with exactly 100,000 yuan were to get half back, according to two investors earlier.

And people holding more than 100,000 yuan of products were to see payments extended by two to four years and amortized, according to the company’s earlier plan.

Apart from the cash option, the new plan also allows investors to purchase Evergrande’s residential units, offices, stores and parking units at deeper discounts to offset wealth products due.

If investors had bought residential units by September 12, they could also request to use the money they are owed to offset payments. Details are still pending for the second and third options.

Chairman Xu Jiayin has said it was necessary to ensure all due wealth products are redeemed fully as soon as possible.

Meanwhile, housing authorities in Foshan said mortgages would be suspended to Evergrande projects in Nanhai district to strengthen risk control for the developer’s projects. There are nine Evergrande projects there.

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